Demystifying Business Budgeting: Simple Steps for Non-Financial Entrepreneurs
Starting your own business is an exciting adventure, but when it comes to handling the money side of things, it can feel a bit overwhelming, especially if you're not a finance expert. Don't worry, though – getting a grip on budgeting is totally doable with some simple steps. Here's a beginner-friendly guide to budgeting for your new business.
Get Your Budget Started
List What You Need to Start: First up, write down all the things you'll need to pay for before you open your doors. This could be stuff like renting a place, buying equipment, stocking up on supplies, or giving your space a makeover.
Quick Tip: Research the prices for everything and then add a little extra (about 10%) to each item, just in case things cost more than you expect.
Don’t Forget the Basics
Set Aside Money for Important Stuff: Some things like permits to legally run your business and marketing.
Quick Tip: Factor in your federal, state, and locally required permits and fees. Also, it's common for small businesses to allocate approximately 7-12% of their total revenue to marketing. In some cases, especially for businesses prioritizing rapid growth, marketing cost can run higher.
Plan for Surprises
Have a Backup Fund: Sometimes things don’t go as planned, and unexpected costs pop up. It’s smart to have some money set aside for these kinds of surprises.
Quick Tip: Keeping about 10-15% of your total budget as a safety net can really help when unforeseen expenses come up.
Think About What You’ll Earn
Guess Your Income Wisely: Try to figure out how much money your business might bring in. Think about your prices and how many people might buy your products or services.
Quick Tip: It’s better to underestimate how much you’ll earn than to overestimate. This way, you won’t accidentally spend money you don’t have.
Pick the Right Tools to Track Your Budget
Find a Budgeting Method That Works for You: There are lots of tools out there to help you keep track of your budget, from simple spreadsheets to more complex apps.
Quick Tip: Choose a tool that feels easy and straightforward for you. Both Microsoft Excel and Google Sheets can serve as quick and easy tools to get started. Most accounting software, like QuickBooks or FreshBooks has built-in budgeting functions.The key is to use it regularly to keep a clear view of your finances.
Keep Checking Your Finances
Regularly Review Your Budget: It’s important to keep an eye on how your business is doing financially and compare how you are actually performing to what you originally budget to see where you stand with what you predicted.
Quick Tip: Make it a habit to look over your budget every month. This helps you spot trends, tweak things as needed, and make smart decisions.
Budgeting for your new business might seem tricky at first, but with these steps, you’ll find it’s actually quite manageable. Just remember, good budgeting is all about understanding what you need to spend, being prepared for surprises, making sensible guesses about what you’ll earn, using tools that work for you, and keeping an eye on your money. You don't need a finance degree to learn how to create and use a budget. With a bit of practice, you’ll get the hang of this very critical tool in your entrepreneurial toolbox!